US-China Trade Truce: Why Semiconductor Stocks Are Poised for a Surge

The 90-day US-China tariff truce, effective May 14, 2025, has injected a critical dose of stability into a semiconductor sector strangled by years of escalating trade tensions. While the agreement stops short of resolving deeper structural issues, it has quietly unlocked a once-in-a-decade opportunity to capitalize on AI-driven demand for advanced chips—a market projected to hit $2.06 trillion by 2032.

The Truce’s Hidden Catalyst for Semiconductor Growth

The truce’s immediate impact—reducing US tariffs on Chinese imports from 145% to 30% and China’s retaliatory tariffs from 125% to 10%—has eased supply chain bottlenecks and lowered costs for companies reliant on cross-border chip manufacturing. While no explicit semiconductor exemptions were announced, key carve-outs for electronics (e.g., smartphones, integrated circuits) and suspended non-tariff barriers (like China’s rare earth mineral restrictions) have created a temporary tailwind for the sector.

This breathing room is critical. Semiconductor companies like NVIDIA (NVDA) and Broadcom (AVGO)—cornerstones of the AI chip race—now face fewer disruptions in sourcing components and shipping finished goods. The truce also reduces inflationary pressures on inputs, enabling manufacturers to scale production without absorbing unsustainable cost hikes.

Zacks’ Top Picks: Riding the AI Wave

Analysts at Zacks Investment Research have identified three semiconductor stocks positioned to dominate the AI boom, amplified by the truce’s stability:

1. Broadcom (AVGO)
2. Why Now? Broadcom’s AI accelerators are embedded in two hyper-scale data center partnerships (rumored to include Alphabet, Meta, Amazon, and Microsoft). Its YTD 2025 return of +116% reflects investor confidence in its AI leadership.
3. Zacks Rank: #1 (Strong Buy).

5. NVIDIA (NVDA)

6. Why Now? As the largest AI chipmaker, NVIDIA’s Blackwell series is powering the next generation of generative AI. Analysts project FY2026 sales of $191.84 billion—a 48% jump from 2025.
7. Zacks Rank: #1 (Strong Buy).

9. Taiwan Semiconductor (TSM)

10. Why Now? TSM’s foundries produce chips for Apple and NVIDIA, making it the linchpin of global AI infrastructure. With a P/E ratio of 29.2X—a bargain relative to its growth trajectory—TSM is a buy at current levels.
11. Zacks Rank: #2 (Buy).

Wall Street’s Bullish Consensus: 2025 Earnings Are Just the Beginning

Beyond Zacks’ favorites, broader semiconductor stocks are primed for gains. Consider these Wall Street-backed picks:
- Impinj (PI): RFID technology leader with 34% EPS growth expected in 2025.
- Lumentum (LITE): Optical networking specialist for data centers; 66% EPS growth projected.
- FormFactor (FORM): Probe card innovator for 5G/AI chips; 39% EPS growth anticipated.

The sector’s 14.9% CAGR through 2032 is underpinned by AI’s insatiable appetite for chips. As companies like OpenAI and Alibaba race to build larger models, the demand for advanced semiconductors will outpace supply for years.

Risks to the Rally: Inflation and the Tariff Wild Card

The truce is temporary, and investors must remain cautious. Lingering tariff-driven inflation—particularly in non-chip sectors like autos and pharmaceuticals—could spill over into broader markets. Additionally, the US’s Section 232 investigations into semiconductor imports (launched April 14) threaten to reignite trade tensions.

The Bottom Line: Act Now, but Stay Vigilant

The US-China truce has created a golden window to invest in semiconductors. With AI adoption accelerating and trade barriers temporarily eased, stocks like AVGO, NVDA, and TSM are set to capitalize. However, investors must monitor tariff negotiations and inflation metrics closely.

For aggressive investors, this is the time to allocate to semiconductor ETFs (e.g., SOXX) or the top-ranked stocks. For the cautious, use dips below key support levels (e.g., NVDA’s $500 mark) as entry points.

The AI revolution isn’t waiting—the semiconductor stocks leading it won’t either.